Letters : Gas competition

From Mr John Surrey and Mr Mike Parker Sir: The public relations furore over the affairs of British Gas should not be allowed to divert attention away from the much more important long-term issues arising from the proposed introduction of full competition in the domestic gas market. The repo r t on this issue by the Trade and Industry Select Committee (TISC) came to conclusions on average price and security of supply which are closely in line with the analysis in our study UK Gas Policy: Regulated Monopoly or Managed Competition?.

On prices, we said that competition is unlikely to result in significant reductions in the average domestic price of gas over and above the effect of the RPI-4 price formula already applied to British Gas; and TISC acknowledges that the extent of any price reductions attributable to the introduction of competition "remains highly uncertain".

We also concluded that, under competition, it will be difficult to maintain the present high level of gas supply security; and TISC agrees that "it will be less easy for new competitors to match supply and demand, given their smaller size and the reducedability to forecast demand in a competitive market".

It was primarily these considerations which led us to the view that the over-all balance of benefits, costs and risks was unfavourable. TISC, using the same data and very similar analysis does not come to that overall judgement and the issue remains unresolved.

Much of the discussion has been polarised into one of "for or against competition". But in the case of domestic gas, we remain to be convinced that there is an overall balance of advantage. It is to be hoped that it is still not too late for this question to be answered before full competition is introduced and irreversible decisions made.

Yours faithfully, MIKE PARKER , JOHN SURREY ESRC Centre on Science Technology Energy and Environment Policy University of Sussex Falmer, East Sussex

From Mr Mike O'Carroll Sir: The media rightly contrast the 75 per cent salary rise of British Gas's chief executive with plans to cut staff pay. But that is not the worst of the scandal. The 75 per cent increase was supposed to make the salary competitive. It should not go to someone appointed in competition at a much lower level. To be competitive, the present Chief's contract should be terminated and the job advertised openly. If the Chief really is worth it, he will succeed.

Yours faithfully, MIKE O'CARROLL Welbury, North Yorkshire